24 september 2011, rabbits, headlights, action

Two things have created the precipice of economic meltdown we find ourselves overlooking. One is powder keg, the other is sparks. The keg is the huge global imbalances that built up in our years of plenty, when china and the emerging world were very happy to lend us an endless amount of money to buy their goods, as anyway they had little faith in their own governance to manage it. The first spark was three years ago, with the implosion of the american sub-prime market, which took every fiscal policy lever we had to stabilise. The second was greece, which became the whole euro area, as inept leadership allowed the problem to fester and grow enormously. It is clear to everyone that there is deep global uncertainty about what to do, with fundamental misgivings somewhere over any particular strong course of action, making for total stalemate as to be effective any policy at this point needs everyone to be strongly rowing the same boat. We stand like rabbits, frozen in the headlights of the oncoming recessionary juggernaut. The markets are intensely volatile, as they struggle to read the runes of every move and statement, and desperately cut their losses when things momentarily subside. Though the bigger eu rescue package agreed before the summer will surely now finally come into being, it already looks too little, too late; though expect some rabbit out the hat tricks to make the number much bigger. The ecb too must surely both chip in and also find some way, at least temporarily, of underwriting the big european banks, where, just as in 2008, the fear that they are sitting on massive potential bad debts (this time sovereign) is utterly undermining confidence. These are the sorts of measures that will need to be in place to create the ring of steel within which greek debt can finally be restructured properly, something the markets have long since priced in (although that need not at all mean leaving the euro, see no way out, 16 january 2010, nor should they want to, as they're not the uk in 1992. The hope must be that default by another name will finally lance the boil, amongst other things allowing the eu's monetary and fiscal sides, which have been fundamentally at odds over the issue throughout the crisis, to lace together their actions better, hopefully beginning to restore confidence. All this is unlikely to be enough to stop the slide into recession, nor will it alter the movement of tectonic plates between east and west that is really driving the crisis. However, it may at least mark the end of a particularly chaotic phase and enable some stability of sorts to be once again established, on which the foundations for moving forward can then be built.

19 september 2011, a time of plenty ?

At a private lunch today with robert chote, the charming and excellent poacher-turned-gamekeeper who now provides the authoritative analysis of the uk's public finances from his semi-autonomous seat as head of the office of budget responsibility. As a former economist at the imf (before his stellar stint at the ifs) we had much to talk about, taking on all comers talking of a euro collapse. Just as independent central banks spread in the 1990s, so now independent budget offices (like that of the us congress) now seem to be becoming international best practice, and for all the brickbats about having no teeth (which it doesn't), this new institution is shaping up well as a marginally important piece of the macroeconomic policymaking jigsaw. It's headline publication, the fiscal sustainability report, is a surprisingly easy read that broaches the important long-term issues beyond immediate policy, such as pensions, oil and healthcare. Their ultimate conclusion is delivered deadpan but bears reading twice, "on current policy we would expect the budget deficit to widen sufficiently over the long-term to put public sector net debt on a continuously rising trajectory as a share of national income. This is clearly unsustainable." Both long-term then, and short (according to today's financial times), we may yet look back at today as a time of plenty rather than the opposite.

14 september 2011, build them and it might come

Nick clegg (5 february 2011), who I had the pleasure of debating with at close quarters a few months ago, tried to make a landmark speech this morning, on the theme of the moment, growth. Henry overmans was not impressed, being rather sniffy about the value of one of the main drivers the deputy prime minister identified, infrastructure. In fact, the literature is rather more ambivalent, or even supportive, provided of course its the right infrastructure, in the right place, which tends very much towards where an economy is growing already and where there is potential for more. Aschauer, gramlich, the british treasury, lau and munnell may all argue about the exact quantification of the multiplier effects of infrastructure investment, but it is clear that in the right circumstances, the effect is a positive one, with significant returns and increased output. It's an important point, as there does seem rather little a little place can do in the face of the current economic squalls, but building for the long-term does evidently seem something.

11 september 2011, where were you...

For the last generation, it was when kennedy was shot; for us it's 9/11. I was interviewing for my job at the european central bank in frankfurt. As I walked into the office of my future boss, his secretary was bouncing up and down, saying that a plane had crashed into the world trade centre. I thought her slightly eccentric. When I came out half an hour later, she was semi-hysterical, saying another plane had crashed into the world trade centre. I said my goodbyes and that I hoped I'd see her again. When my taxi arrived at the airport I still had no inkling, and even when a huge slew of planes were showing up delayed or cancelled, it took a while. There were televisions dotted around though, and each had crowds in front of them, so that was the clue. Fighting my way to a payphone, I called my other half, who was sat in london with our then 3-week old child, blissfully unaware of everything; amazing how slow news travelled before proper mobile phones. I told her to turn on the tv and she asked me what film it was. When she got her head around it, she thought it was the start of the third world war. It was the thirtieth birthday of one of my friends, and last night was her 40th party, so that's where we were reminiscing, me having spent the morning accompanying that 3-week old to his first secondary school entrance exam, which was even more scary than 9/11. It was also my own birthday: 21 again, in my mind anyway, which is what counts, or so I tell myself.

8 september 2011, will they or won’t they

The days are ticking now towards the palestinians' declaration of independence at the united nations, and half the diplomatic world waits to see if they will back down. There is of course the longest history to this (see signing palestine's birth certificate) and it is something of a rerun of 2000, when then-chairman yasser arafat did indeed back down, only to bitterly regret it later. Although america would veto an outright membership attempt, opposition seems to retreating for the so-called "vatican" option, which is palestine being accepted by the general assembly (as opposed to the security council) as an orwellian-termed "non-member state". This allows america to have it both ways: not needing to block it, and saying that technically it couldn't anyway. If ready to try his luck, there is a way to turn it into applying pressure on israel to restart negotiations, an issue on obama, whatever the rhetoric, has so far followed the rather spineless bush playbook on. "We have to give them something" seems the general mood both in europe and the world at large, and the palestinians have painstakingly built up to this and would lose huge face by backing down - and so just such a half-way house, which would represent a significant step forward towards palestinian statehood, is not an outlandish scenario. A happy new year for some.

3 september 2011, the clock keeps ticking

The debt clock was, I think, an invention of the reagan era, laid to rest when clinton balanced the budget, but now as relevant as ever, as it continues to tick rather wildly up. Today, every us citizen owes almost fifty thousand dollars each, and as the leeway that the dollar being the world's reserve currency provides finally begins to run out, that is forcing america down the now well-trodden road of fiscal contraction that the rest of us have already been following for some time. Many think this is not the right path, but it is that debt, and its echoes in other parts of the western world, that make it inevitable. As growth slows, so will tax revenues, compounding the already deep and deeply-unsolved problem of paying for pensions (and benefits in europe) and now the absorbed banking and financial debts and guarantees that have loaded up these governments. When these problems hit america, home of the world's flight to safety assets, we've really got problems. It is american borrowing that has kept the world afloat for many years. When it can no longer borrow on such a scale, someone else needs to pick up the baton, just as america itself did, replacing britain and sterling as the world's supreme financial power early in the last century. We are living through history.

american national debt at this moment

30 august 2011, that was the wedding that was

The seventh of seven cousins, my brother's on sunday was the last wedding of a generation for us, and quite a long time coming, and quite wonderful. A rare but memorable meeting of so many different strands of family and friends, old and new. Meticulously planned by the bride and groom, it so clearly reflected their own styles and selves, from the lastminute.comness, to the all going swimminglywellness, to the mix of humour and melancholy of the speeches, to the more original events of the day, to the guests, to the everyone pitching in, to the amazing but so them venue, to the kids and the babysitting, to the drinks, to the afterparty, to the day after, as they left with the smoke alarm going off but with all ending well, to their very well deserved honeymoon. She looked amazing, he said all the right things, and everyone played their part in the richest mosaic of a day and indeed of the new life that together they now share, having got over the too much schmaltz part. The determination to hold the chuppah outside in glorious sunshine, despite the dark clouds earlier overhead, paid off marvellously, as we all revelled in what was probably the very last day of summer, and the start of something else, hopefully even sunnier.

29 august 2011, been away

As you may have noticed, I've been on holiday. Usually, we go to hungary every summer, but this year hungary came to us, in the form of my other half's entire family coming over for a week. Having filled our boots with her family, we then did the same with mine, going down to london for my brother's aufruf, the ceremony a week before a wedding. It took place at a charming little synagogue in the east end, an area the centre of jewish sweatshop existence when the hordes came before the first world war. All have long since moved to north london and beyond, but my brother was one of a group who brought life back to this historic corner. After that we did the obligatory day at legoland, and then spent the week in east sussex, which was a wonderful break with the family, although everywhere we actually went - eastbourne, hastings and the de la warr pavilion - was a tad dissapointing; although the miniature railway was ok, and battle was gorgeous. Highlight of all though was bath: never been before, but definitely going again. En route we visited stonehenge: a first for the rest, but second time for me, having already had a mythical experience driving there in the middle of the night when much younger. It was foggy when we arrived, and so drove up and down several times before believing the map, hopping over the fence and then magically the fog lifted and we were right there, metres away; the massive other-worldly structures literally taking our breath away. Chased off, we pitched our little tent on the road's grass verge, to find the next morning we were in the middle of what had become a tourist funfair, and wandering around both that morning and this time around too was not quite the same as that first spiritual glimpse. On then to the wedding...

15 august 2011, masses media

A week on, and the riots are decidedly over. They finished on wednesday. They didn't peter out: on tuesday they raged their fiercest outside the capital, yet the day after not a whimper anywhere. There were three reasons. Firstly, there were 16, 000 police on london's streets; secondly the polical class and prime minister came home from holidays and took to the airwaves; and thirdly the rain was absolutely pouring down: we brought out the manchester water cannon. Though the third may well be the most important on the night, what the other two have in common was that they changed the narrative, as carried by the mass media. On saturday, the pictures were of riot, and so on sunday, as they spread, all stops were out to protect public order. What actually happened though was looting, as the image the media was transmitting was one where shops were not being protected; directly transmitted pictures were of windows being broken and goods being taken. That set the tone for next days: people were taking things, leading a growing number of people to questions whether they couldn't too. On tuesday though, the pictures were of an endless stream of police coming into the capital: tonight's not the night was the message. More subtly, rioters' photographs were being circulated and cases were coming to court, relaying that people were getting caught and punished. It may sound trite but the sudden return of the politicians too had an effect. No-one may have listened to the words, but their presence said action, control, authority, order being restored. Together, that killed the whole movement, dead. The key to all that was the mass media. It was the media than enabled it and the media that stopped it, because media today is so pervasive and it has an almost sensient ability for people to feel the atmosphere and react accordingly. On phones, tvs and blackberrys, people felt it and reacted accordingly. Given its variety and dynamism, using the media to define and relay messages is harder than ever - but no less important. Ironically, malcolm x knew this years ago, calling it "the most powerful entity on earth. They have the power to make the innocent guilty and to make the guilty innocent, and that's power. Because they control the minds of the masses."

9 august 2011, civilisation slipping away ?

Another part of that same multitude of humanity I saw having fun on the brighton seafront at the weekend has been displaying a more vicious side over the last days, as riots have exploded across london's more deprived high streets, echoes have savaged birmingham city centre and violence has reared its head in liverpool, nottingham, bristol and elsewhere. In london, shops are shutting early and the knock-on economic effects are only just beginning to be felt. Although policing and its community relationship in a racially-charged area provided the spark, these don't feel like race riots. Nor do they have ideology at their heart like the student riots earlier in the year. Austerity and the cuts may be the talking point, but they are neither cause nor excuse. Rather, the feel is of venting youth, despondent at not being able to buy the glittering goods on display on every high street, and increasingly of any hope that they will ever be able to buy them. Hope and aspiration enable people to absorb a lot; these are youths who have little hope, and so little to lose. What protects shop windows from being shattered on any given day is not the police or security shutters, but the invisible glue of civilisation, an order that ensures that if one person has more than another, it can't be taken by force. Property is not theft, but for theft not to be proper both the sanctions of wrongdoing and the prospects for change for those without have to be real. Criminality must be punished therefore, every incident a camera can catch, but the causes conspiring to create hopelessness must also be addressed. Everyone needs a stake in society and a chance to progress through intelligence, hard work, resolve or originality. That balance has clearly broken down, and for civilisation to survive, both sides of the equation need bolstering, however difficult the times - or they will only get worse.

Previous 10 Results Next 10 Results